More changes coming next week to embattled MPF

Chairwoman of the Mandatory Provident Fund Authority Anna Wu Hung-yuk said on Friday that she expected major changes to the current MPF program.

The research report on MPF, commissioned by a consultant, is expected to be released early next week. The report is expected to cover administration fee adjustments and simplification of the current MPF as two major focal points.

After the MPFA management board met on Friday to discuss the research report, Wu emphasized that they might not let the government act as a public trustee for MPF, and hoped to find some non-profit or low-profit organizations to provide cheap MPF choices for employees. She cited an example in Australia, which allowing a labor union as the public trustee.

Wu also said she hoped to simplify the MPF system and correct inefficiencies and high management fees.

The simplifications could include reducing the number of accounts for employees and lowering administration costs by using an electronic service. The authority is particularly looking for guidance on the positioning of MPF.

Wu said the government has a positive attitude toward MPF reform and that the detailed information about MPF will be announced early next week. At that time she will explain the future direction of MPF. The report is expected to deal with the means to increase public confidence in the MPF.

The MPFA has no mandate to modify the current MPF system, so the government and Legislative Council must coordinate their efforts, if changes are required, said Wu.

Secretary for Financial Services and the Treasury Chan Ka-keung said in late October that there is room for further reduction of administrative fees charged by trustees, especially in view of the continued growth of MPF.

He added driving down excessive MPF administrations fees has been on the top of the government agenda.

The MPF Employee Choice Arrangement, which commenced on Nov 1, gives employees greater autonomy to transfer their contributions and investment returns to an MPF trustee of their own choice.

Employees also may retain the MPF trustees originally selected by their employers.

Chan said this offers more choice in making long-term investment plans, but he cautioned investors to check MPF products and their costs, and not to rush their decisions.

Chan added the new arrangement will boost competition and drive down MPF fees. The government will follow up with the MPFA to ensure increased market transparency and reduced fees.

fanfeifei@chinadailyhk.com